By announcing its currency the yuan will no longer be pegged to the U.S. dollar, China had hoped to silence critics who accuse Beijing of manipulating its currency. Government officials, however, are still concerned the currency will become the center of unwanted attention and criticism at the G20 summit in Canada later this week.
The decision to unshackle the yuan from its two-year peg to the dollar has been met with mixed views.
Foreign Ministry spokesman Qin Gang warned the world to stop accusing China of being a currency manipulator. He said all parties at the summit should display what he describes as the spirit of overcoming difficulties together. The international community should strengthen cooperation to contribute to the world's economic recovery, Qin added, instead of playing what he describes as the blame game and imposing pressure on China.
China's big state banks appeared to engineer a slight fall in the yuan's value by aggressively buying dollars Tuesday. Some economists saw that as a sign the government wants to control the pace of the yuan's appreciation.
The yuan rose to a new five-year high before turning lower Tuesday.
Many international economists, trade experts and foreign exchange traders have said the currency is likely to strengthen only modestly. Some economists have described the unpegging as meaningless and a political move.
Others have welcomed what the see is the start of reform of China's foreign exchange policies.
The United States, European Union and other governments have long criticized China for its foreign exchange policy. Many economists and business leaders in the U.S. and Europe say the yuan is undervalued by as much as 40 percent, which makes Chinese products cheaper overseas. That, they say, contributes to China's trade surpluses with other countries and to its rapidly growing foreign currency reserves.
Some members of the U.S. Congress have threatened to impose punitive measures on Chinese imports if the yuan did not appreciate.
Later this week, Chinese President Hu Jintao is attend the G20 summit in Canada, where he will meet with leaders of other major economies.
Political analysts say that by unpegging the yuan, China hopes it has appeased many of its critics by showing it is serious about making its currency more flexible.